Advisors need to listen more to keep clients on board, study says

Wealth

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Financial advisors are largely an optimistic bunch when it comes to growing their practices, new research shows.

Yet they know they have some work to do to make that happen.

While most advisors expect growth in their assets under management to come primarily from new and existing clients rather than market returns, they also say their client-relationship skills need improvement, according to a suvey from Natixis Investment Managers.

“It’s about being stronger at actively listening and understanding what clients are really saying,” said Dave Goodsell, executive director of Natixis’ Center for Investor Insight. “You’d think if you do that, you’ll have clients with you for a longer period of time.”

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The survey canvassed 300 U.S. financial professionals — wealth managers, registered investment advisors, financial planners, and wirehouse and independent broker-dealers — who collectively manage $28.9 billion in client assets. The research, done in March and April, is part of a larger global study of advisors.

The survey comes amid economic uncertainty springing from the coronavirus pandemic and anticipated continued volatility in the markets. While the stock market has recovered from its lows in late March, ongoing volatility is expected. So far this year, the S&P 500 index has lost about 5.7% and the Dow Jones Industrial Average is down roughly 11.4%.

In the U.S., surveyed advisors said they expect their managed assets to grow by 7.2% over one year and by annualized growth of 17.2% over the next three years. They expect the primary driver to come from new (89%) and existing (80%) clients. Market returns are cited at the top of the list by 55%.

So how do they think they need to improve their client relationships? Mostly by getting to know client family members and next-generation heirs (53%), followed by helping clients avoid emotional investment decisions and demonstrating value of advice beyond their portfolio (41%).

Those who say they successfully retain clients and expand those relationships point to regular communication (58%) as the top reason for their success, followed by getting to know clients on a personal level (57%) and building relationships with clients’ families (42%).

One way to reach other family members is to offer to help their children, Goodsell said. For example, college graduates could probably use some help, he said.

“Advisors could offer to help with how to manage debt, investing in a 401(k) and helping to explain the things that come into play as they transition to a job or career,” Goodsell said.

More than two-thirds of advisors surveyed said that failing to communicate in a way expected by clients is the biggest reason an investor would leave a financial advisor. Right behind that, 64% said a departure boils down to not listening to clients. About a quarter said clients leave their advisor due to not meeting portfolio-return expectations.

In addition to improving their client relationship skills, advisors also spend little time working on expanding their roster — just 9% in a typical week. While the task competes with other aspects of running their business, the more efficient an advisor can be with their practice management, the more time they free up to focus on growing their client roster.

And if they don’t?

“There’s risk that [competitors] will be accelerating their capabilities, and you may miss opportunities both for new clients and retaining clients, as well,” Goodsell said. “Getting to know them on a personal level can make a world of difference.”

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